Before Apple's iPhone barged in and changed the game, Microsoft was one of the leaders in the smart phone arena. Its Windows Mobile phones were popular contenders, particularly among business users.

But the iPhone took smart phones in a different direction. The clunky menus and awkward navigation on Microsoft phones paled in comparison to the intuitive, touch-screen-based competition. Microsoft couldn't respond fast enough, and Windows Mobile's market share imploded.

Because smart phones are a rapidly growing and lucrative category, Microsoft isn't about to give up. Enter Windows Phone 7, a completely reworked version of the company's smartphone software and a reboot of how Microsoft thinks a smartphone should work. I've been playing with a phone that uses it; it's remarkably good and very different from anything else out there.

Most modern smartphones use an interface that dates back to the earliest models developed by Palm, with rows of applications you tap or click to launch. On Windows Phone 7, you're presented with a series of tiles in two columns. They represent either frequently used apps or a collection of related apps called hubs. They're dynamic: If there's live information coming into an app, you'll see it displayed in the tiles. For example, if a song is playing in the Zune media player, its album art is visible in its home screen tile.

Tap on any item, and the tiles swing out of sight, as if a wind has blown them away. Apps launch very quickly, and on the phone I tested - an HTC Surround, to be sold by AT&T - almost everything about the phone was zippy and fluid.

The Surround uses a 1-gigahertz processor to power a 3.8-inch touch-screen display. The bottom half of the phone slides up to reveal a set of small speakers, which, along with a kickstand on the back, make it easier to watch video. As with all Windows Phone 7 devices, there are three software buttons under the screen - Back, Home and Search, which brings up Microsoft's Bing search engine. It will sell for $199 with a two-year contract. (So far, AT&T and T-Mobile have announced nine Windows 7 Phone devices.)

Each of the phone's hubs is devoted to a specific category. The People hub manages your contacts and social media; the Office hub lets you read and edit Microsoft Office documents; the Games hub integrates games on the phone with those on your Xbox 360, and so on.

Some apps written by Microsoft partners can plug directly into the hubs, while others work as stand-alone programs. For example, access to Facebook is integrated deeply into the People hub. If you link up your Facebook account, your contact list can show Facebook updates from your friends.

However, because not all Windows Phone 7 apps get to plug into the hubs, you don't always get this blended experience. I much prefer Twitter to Facebook, but none of the available Twitter apps has hub status.

Once you're inside a hub or an app, you navigate in two ways. Usually, scrolling horizontally takes you through categories of features. Then, to see specific features or information, you scroll vertically. In the Outlook app, for example, you scroll horizontally to see All Mail, Unread or Urgent categories, then you scroll down to see the e-mails in each of those categories. It's a smart and intuitive design.

One of the nicest features is the Zune media player, which uses the same software found in Microsoft's Zune hardware players. While the Zune has been mocked in the past, its software is actually quite good, and in many ways I prefer it over that found in non-touch-screen iPods.

As with the iPhone and Android, Microsoft is making apps available through an online store, the Marketplace. As you'd expect, there aren't many apps in there at the moment, and of those available, many are from small developers you've probably never heard of. But even some of the big-name apps still need work. Over time, this kind of thing will be fixed, but early adopters should keep that in mind.

I'm very impressed with Windows Phone 7, to the point that I'd consider a phone that uses it in the future - and that's coming from a die-hard iPhone user. That said, this is very much a Version 1.0 release and lacks some key features. It doesn't have cut-and-paste, for example, and its multitasking is severely limited. There are small interface irritations, too. For example, the battery status and connection icons can't be displayed full time at the top of the home screen; you only see them briefly when you tap the top of the screen.

These all can be fixed with updates (Microsoft will add copy/paste early next year), so I expect this already intriguing mobile platform to get even better. Right now, Windows Phone 7 is a contender. A year from now, I expect it to be a serious challenger.